TMI Blog2008 (8) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of Rs. 2,37,702 which was in excess of 8.33 per cent. maximum statutory limit under the Act could not be allowed. Commissioner (Appeals) allow the appeal and the Tribunal allowed the deduction in respect of ex gratia payment made to the employees. Held that- the Tribunal was justified in holding that the ex gratia payment made in excess of the limit prescribed under the payment of Bonous Act, 1965, either under section 36(1)(ii) of the Act was allowable as business expenditure. The Tribunal was justified in holding that exgratia payment made over and above the amount paid in accordance with the Bonous Act was an alloweable expenditure though the payment did not cover contractual payment or customary payment. - 1 of 2004 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax held that the payment of only 8.33 per cent. was in accordance with the Bonus Act and therefore, the payment of Rs. 2,37,702 which was in excess of 8.33 per cent. maximum statutory limit under the Act could not be allowed. 3. Feeling aggrieved by the order passed by the Deputy Commissioner of Income-tax, the assessee/respondent filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) vide his order dated September 2, 1994, allowed the appeal thereby holding that the amount of Rs. 2,37,702 being the ex-gratia was made to the employees in order to maintain healthy relations and industrial peace. The Commissioner of Income-tax (Appeals) relied on the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the decision of CIT v. Sree Kamakhya Tea Co. P. Ltd. [1993] 199 ITR 714 (Cal), CIT v. National Engineering Industries Ltd. [1994] 208 ITR 1002 (Cal), CIT v. Ganges Rope Co. Ltd. [2001] 252 ITR 524 (Cal) and CIT v. Rajasthan State Mineral Development Corporation [2003] 261 ITR 479 (Raj). 8. Perusal of the aforesaid decisions of the Calcutta and the Rajasthan High Courts shows that the object of the proviso to section 36(1)(ii) of Income-tax Act was to encourage the management to pay bonus in excess of what is statutorily bound to be paid to the employees provided the payment is justifiable as "reasonable payment." It was observed that any other construction of the said provision would be artificial and may not be in keeping with such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The gravitational pull on judicial construction of Part IV of the Constitution has to some extent influenced this conclusion. Thus it can be held that the Bonus Act (as it stood in 1965) does not bar claims to customary bonus or those based on conditions of services. Schematically speaking, statutory bonus is profit bonus. Nevertheless, there is provision for avoidance of unduly heavy burden under different heads of bonus. For this reason it is provided in section 17 that where an employer has paid any puja bonus or other customary bonus, he will be entitled to deduct the amount of bonus so paid from the amount of bonus payable by him under the Act. Of course, if the customary bonus is thus recognized statutorily and, if in any instanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to our notice the decision of this court (Division Bench Coram : Dr. B. P. Saraf and Dr. Mrs. Pratibha Upasani JJ.) in CIT v. Rajaram Bandekar and Sons (Shipping) P. Ltd. [1999] 237 ITR 628 (Bom). 11. In the said case reference was made for the opinion of the High Court as regards to the payment of ex-gratia to the tune of Rs. 1,58,828 to the employees and whether such payment can be deducted as business expenditure by the assessee. This court held that the Tribunal in the said case was not right in holding that the payment of ex-gratia amount of Rs.1,58,828 to the employees was by way of bonus for the services rendered and accordingly allowable as deduction under section 37 of the Act. The High Court remitted the matter back to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not to other payments? 2. Whether on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the additional bonus of Rs.5,26,767 is allowable as a deduction under section 37(1) in spite of specific restrictions imposed by the proviso to section 36(1)(ii)?" 14. For the reasons stated above, we are of the view that the points for reference framed in paragraph 1 above deserve to be answered in the affirmative as the same are covered by the decisions of this court in the case of CIT v. Rajaram Bandekar and Sons (Shipping) P. Ltd. [1999] 237 ITR 628 (Bom) and CIT v. Raghuvanshi Mills Ltd. (Income-tax Reference No. 169 of 1987). Accordingly the reference is answered and the same may be returned to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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